Decision Models for Corporate Sustainability

Abstract:

This dissertation explores decision problems faced by organizations willing to address or support the incorporation of sustainability aspects on their "business as usual" activities. We study to specific problems. First, we analyze the decision problem of a forest manager who, in addition to selling timber, has the option of selling carbon offsets for the carbon sequestered by the forest. We study both the single-rotation and the multiple-rotations harvesting problems, and develop stochastic dynamic programming models to find the optimal harvesting and offset-selling policy, the expected optimal harvesting time, and the expected optimal reward under different offset-trading schemes. Then, we study the case in which an organization (sustainability buyer) outsources sustainability efforts to another organization (sustainability seller). While buyers cannot directly exert sustainability efforts, they can provide economic or technical support to their sellers in order to incentivize these efforts. We investigate how the effort and support decisions change according to characteristics of stakeholders, buyers, and sellers. Considering that buyers can compete on the sustainability effort exerted by their sellers, we extend our analysis to the case of competing buyers, and we determine conditions under which sharing sellers is preferred by the buyers to having separate sellers for each buyer.